Profit-taking crimps stocks - 11-09-98

KevinN. Marder

NEW YORK (CBS.MW) -- U.S. stocks landed in negative territory for the first time in nine sessions Monday, as last week's virtuoso performance invited a flurry of profit-taking.

The Dow Jones Industrial Average
DJIA, -1.56%
declined 77.50 points, or 0.9 percent, to 8,897.96. It's run up 6.3 percent over the last eight trading days.

Last week, the Dow added 383.36 points, or 4.5 percent. It was the barometer's second-best weekly showing since June 1997. The advance came as participants factored further Federal Reserve interest-rate cuts into prices.

Monday's downdraft did little to dent the spirits of some market watchers.

"I would anticipate the market's action to be very similar to what we saw a couple of weeks ago," said Gregory Nie, senior vice president of technical research at Everen Securities. "Then, we paused, took a timeout, and did a little backing and filling before we gathered steam and came through Dow 8600.

"I would look for the market to find support at Dow 8600 or better," said Nie. "It would just be another period where we rest up a little before we make another run at the 8900-to-9200 level. If we do fade, I think it will be a buying opportunity."

"The best indication of the current strength of the market is its inability to [pull back] even a token amount," said Robert Dickey, managing director of technical research at Dain Rauscher Wessels, in a research report. "Whether it should or could is not the issue, but the fact that it won't is most bullish.

"The biggest risk that we see for investors now is not being in the market between now and year-end. Those who are waiting for a signal or another dip may end up missing the move altogether."

Monday's selling was minimal given the giant gains of late. Moreover, it came on a dry-up in volume, reflective of minimal profit-taking. It was the lightest Monday session in 11 weeks.

Little of fundamental import was on the day's agenda. The vast majority of the biggest U.S. corporations have already unveiled third-quarter earnings reports, so investors' focus has shifted to the outlook for 1999 U.S. economic growth and further Fed interest rate cuts. Most on Wall Street expect at least one more Fed rate trim by year-end.

"Investors are more accepting of the idea that perhaps there is no real broad downturn in economic activity that's pending," said A.C. Moore, chief investment strategist at Dunvegan Securities. "When they do that, they ignore at their peril the message from the Federal Reserve. The Fed is looking into that economic glass and it feels that economic conditions are trending downward.

"When economic conditions begin to move in a certain way, the trend tends to stay that way," he said. "We've seen a couple of good economic reports, but the overall trend is one of slackening worldwide activity and recession. Those difficulties continue to make their way to our shores through international companies.

"So, I think it's premature to suggest that the market is out of the woods," Moore concluded.

Transportation
DJT, -0.46%
shares were a prominent loser after negative analyst comments grounded the airline group. Financial issues
$nf
also worked their way lower following huge gains over the past month.

"To buy companies whose stocks sell at 40 to 50 times earnings that have growth rates in the teens is probably much too optimistic for the current investment environment," Moore said. "We like the grocery store group a great deal. Albertson's
ABS, +0.00%
and SuperValu
SVU, +10.55%
are picks here."

On the earnings docket, May Dept. Stores (MAY)
MAY, -6.25%
dipped 1 1/8 to 59 1/16. It reported third-quarter net of 52 cents a share, 4 cents above the year-earlier figure. That was in line with the expectations of most Wall Street analysts.

Comcast (CMCSA)
CMCSA, -1.06%
rose 1 1/2 to 46 1/4. The nation's fourth-largest cable operator checked in with a third-quarter loss of a cent a share vs. the 18-cent-a-share deficit it logged in the same quarter of 1997. The figure was far better than the shortfall of 25 cents that Wall Street had forecast. See full story.

In other specific issues, AMR (AMR)
AMR, +2.75%
declined 4 1/4 to 62 1/2. Goldman Sachs cut shares of the parent of American Airlines to "market perform" from "trading buy." The broker expects 1999 pretax profits of primary U.S. airlines to suffer due to slackening demand and increased capacity.

America West Holdings (AWA)
AWA, -4.08%
lost 1 7/8 to 14 7/16 and US Airways Group (U)
U, +0.00%
sank 2 3/8 to 50 5/8. Goldman lowered its opinion of the stocks to "market perform" from "market outperform."

JP Morgan (JPM)
JPM, +0.76%
sagged 4 to 99 3/4. It will lay off 750 workers, or about 5 percent of its total.

Alcan Aluminum (AL)
AL, -2.16%
added 7/8 to 28 3/16. It inked a 10-year aluminum supply agreement with General Motors (GM)
GM, -0.20%
for the use of aluminum in automobile components and structures, including the development of more fuel-efficient vehicles. The multibillion dollar agreement ensures the supply of metal from Alcan at competitive cost to meet General Motors' projected needs into the next decade. See full story.

Broadcom (BRCM)
brcm
climbed 6 to 92 1/2. It released a new chip that enables a viewer to watch television programs and Internet pages at the same time. See full story.

Geron (GERN)
GERN, -3.14%
slipped 3 7/16 to 13 3/4 following Friday's 2 5/16-point rise. Friday, the biotechnology interest announced it had discovered a means of reproducing human stem cells for use in transplantation and human tissue production.

Centocor (CNTO)
CNTO, -20.00%
appreciated 4 3/8 to 51 5/8 after a study showed that its anticlotting drug ReoPro, when used in conjunction with stents, reduces the risk of death in heart disease patients by 57 percent.

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